Life Time Cost of Public Servants

Abstract

PREAMBLE

The government of Pakistan is facing a growing financial challenge due to the high number of non-productive government employees. Politicians pride themselves on placing their favourites in the public sector knowing that the taxpayer has no say in the process and will pay the cost.

Yet no one looks at what the cost of this dirigiste politics is! Not only are most political employees mostly employed in positions where they are not productive, they are also a drain on the budget.

An employee when hired represents a stream of commitments from the budget for her lifetime and beyond given guarantees a of lifetime employment and pension and for pension to surviving widows and unmarried daughters. We show here what the expected compensation amounts to. We calculate the present value of the government commitment here. This is the value that the government must place in a bond to make the hiring budget neutral for the coming generation. Otherwise, the cost will inflate in future budgets.

The estimates presented here are of immense value in understanding our fiscal predicament. We do hope that politicians and media will use them in a debate on our fiscal situation. Like all estimates they are based on available data and some assumptions.